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AEMC sticks with outdated loss factors, undermining investment confidence

The decision by the Australian Energy Market Commission (AEMC) to retain the existing marginal loss factor (MLF) regime, which is no longer fit-for-purpose, will further undermine investor confidence in new clean energy generation.

In the past year, the lack of investor confidence has already seen new investment in large-scale renewable energy collapse by more than 50 per cent.

Clean Energy Council Chief Executive Kane Thornton said the decision to retain the existing regime did not reflect the needs of the current Australian energy industry.

“While industry welcomes debate and analysis of alternative reforms, simply retaining the current regime is deeply problematic and undermines the energy transition underway in Australia,” Mr Thornton said.

“We had expected that the AEMC would consider how losses could be shared by generators in a way that presents less volatility and more manageable risk, without increasing consumer costs or ignoring transmission losses.”

“The AEMC has missed an opportunity to think openly and creatively about reform to the current flawed MLF framework.”

“It is disappointing that the AEMC undertook very little of its own analysis of the possible options, particularly given its extensive critique of the independent analysis undertaken by Baringa Partners for the Clean Energy Council. The Baringa work was only ever intended to be indicative of potential wholesale market impacts as a potential input into a full cost benefit analysis that we had expected the AEMC would undertake.”

Measures taken by the Australian Energy Market Operator to improve transparency have been a positive move, but ultimately do not fully address the impact the current MLF regime is having on investors.

“To ensure a robust future for the energy industry, Australia requires a market framework that supports the transition to new clean forms of energy generation,” Mr Thornton said.

Please contact Andrew Giddings on 0413 062 704 or Natalee Ward on 0408 377 901 for more information or to arrange an interview.